The U.S. has exempted 11 nations from financial sanctions in connection with their purchases of Iranian oil, but left the threat of penalties open on China and India.
The move means that banks in Japan and 10 European Union (EU) nations have been given a six-month break from being cut off from the US financial system while they work to reduce their dependence on Iranian oil.
But Iran's top two oil importers, China and India, as well as U.S. allies Turkey and South Korea, were not included on the list; implying the threat of financial sanctions still hangs over the four nations if they continue to purchase oil from Tehran.
The decision takes account of Japan's steps on Iranian oil, including its future response, Japanese finance minister Jun Azumi said, according to Reuters.
Japan wants its crude importers to cut imports from Iran by 10 to 20 percent, according to the chairman of the Petroleum Association of Japan Akihiko Tembo. Japan has reportedlty already been scaling back its dependence on Iranian crude.
Carlos Pascual of the U.S. State Department praised Japan's efforts, saying the country's cut in oil purchases showed what was possible for other nations.
If Japan was able to do what it did ... that should be an example to others that they could potentially do more, he said, according to Reuters.
The actions taken by these countries were not easy, U.S. Secretary of State Hillary Clinton said in a statement.
We commend these countries for their actions and urge other nations that import oil from Iran to follow their example.
The implied threat of sanctions puts those countries which are not on the safe list in a precarious position.
Turkey, for instance, said it could not reduce its dependence on Iranian oil unless alternative sources were found.
Other nations, such as South Korea, have increased purchases of Iranian oil by 20 percent in 2011, with further deals to increase this in 2012.
But despite the threat, U.S. President Barack Obama has the power to waive sanctions if it is in the national interest.
According to the State Department, the 10 EU nations who agreed to stop importing Iranian oil from July were Belgium, Britain, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland and Spain.